But the announcement comes after Lord Neuberger, president of the Supreme Court, warned the cuts of £350 million which have already been planned could restrict access to justice for those who need it.

Legal aid will be cut for a range of civil cases including those involving divorce, employment, family problems, clinical negligence, and housing problems.

Mr Grayling said: “Criminal defence represents by far the largest element of our remaining legal aid spend, where we are still spending over a billion pounds a year.

“We are committed to ensuring that the criminal legal aid scheme of the future continues to protect people’s fundamental right to a defence.

“However, against a background of continuing financial challenge, we need to ensure we target our resources in that area too.”

But Maura McGowan QC, chairman of the Bar, warned making lawyers compete for contracts was a “blunt instrument” which “assures none of the safeguards and qualities which we must expect from our justice system”.

“It cannot be one which properly underpins the effective operation of the rule of law,” she said.

Details of the proposals will be published in a consultation paper next month.